Investment Profile of the Pavlodar Region
In 2003 the Pavlodar region celebrates its 65th anniversary. Enjoying a strong combination of natural, production and human resources, Pavlodar Region occupies a special position in the national economy. It is one of the leaders in Kazakhstan in output of power, coal, alumina, ferroalloys and processing of oil products. The social and economic potential of the Region supports regional government programmes for import substitution, rural development, reduction of poverty, etc.
Pavlodar Region was established on 15 January 1938. The total length of the region’s boundaries is 2,100 km. Pavlodar Region has an area of 127,500 km2. It borders the Altai Territory to the east, Omsk and Novosibirsk Regions of Russia to the north and north-east, East Kazakhstan and Karaganda Regions to the south, and Akmola and East Kazakhstan Regions to the west. Pavlodar Region has a population of 748,700 people. Pavlodar is the administrative centre. The administrative structure includes
3 cities, 7 towns, 10 rural districts, 172 rural areas and 509 villages.
Climate and Natural Conditions
The climate is harsh continental. Winters are long and cold with frequent snowstorms, and summers are hot and dry. The average temperature is -17 to -19°? in January and +20 to +22°? in July. Average annual precipitation ranges from 220 mm in the south to 300 mm in the north. Day length is 17 hours in June and 7 hours in December. The average annual atmospheric humidity is 69%.
The terrain is dominated by a steppe plain which is traditionally called Saryarka (Kazakh for “golden steppe”). And it does indeed contain immense wealth. Pavlodar Region is one of the most important mining areas in Kazakhstan; its deposits include more than one third of the national reserves of coal, 9.4% for gold, 3.7% for copper, 2.3% for molybdenum, 30.8% for fluxing limestone and 32.5% for moulding sand, zinc and other minerals. Of 115 solid mineral deposits explored in the region, 48 have been brought on stream. The total value of the solid minerals alone is estimated at US$460 billion.
Pavlodar Region has abundant water resources. There are more than 140 rivers; the largest ones are the Irtysh, Shiderty and Olenty. The Irtysh has an annual flow of about 100 km3. The river is a major source of drinking water for cities and rural districts and supports a number of industrial facilities. The Irtysh-Karaganda canal is unique in that along its nearly 500-km course the water flows uphill and traverses a 500-meter-high watershed, driven by 22 pumping stations. The landlocked position of the Region and its flat terrain made for the formation of some 1,200 large and small lakes, mostly saline; only about 100 of the lakes contain fresh water.
Socioeconomics of the Region
Pavlodar region, in which production comprises an optimal combination of traditionally sophisticated products, and processing of minerals and hydrocarbons, is one of the major industrial areas in both Kazakhstan and the CIS. The processing industry accounts for the largest share of the overall production output of the region (64.7%), followed by the mining industry (13.9%), and production and distribution of power, gas and water (21.4%).
Large export-orientated complexes form the backbone of the Region’s industry. These supply coal, power, heat, alumina and ferroalloys to the market. At present local products are exported to 27 countries. In 2002 a positive trade balance of US$143.9 million was achieved, mostly due to the export of minerals, metals and chemicals to the CIS and elsewhere. Pavlodar’s industry accounts for 7% of the national industrial output, 62% of coal production, 3/4 of ferroalloy production, and 40% of power petrochemical products. The Region has adequate potential for the development of chemical, engineering and metal-working industries. In addition, a raw material base and processing capacities are in place for the development of agribusinesses.
Basic Industrial Enterprises
Heat-Power Plants 2 and 3 (operated by Pavlodarenergo) form a huge power complex whose smooth operation is vital for the region’s economy, the industrial giants and the infrastructure of the city and Region.
The Pavlodar aluminium plant (owned by Alyuminium of Kazakhstan) was the first in the Kazakh alumunium industry, and remains the leader of the country’s non-ferrous metallurgy sector. Alyuminium of Kazakhstan owns not only this plant, but also the Krasnooktyabrskoye and Torgaiskoye bauxite mines, the Keregetas limestone mine and Heat-Power Plant 1 in Pavlodar. All these facilities form a single processing complex which allows the production and processing of minerals to be performed at a minimum cost.
The Kazenergokabel cable plant in Pavlodar is the largest in the country. This plant manufactures 2,500 items of cables and conducing materials of various types, brands and profiles. The plant received the Government’s Winner of the Import Substitution Programme award.
The Pavlodar refinery was brought on stream in 1978; it manufactures black oil, gasoline, diesel fuel and liquefied gases. The refinery has an annual capacity of 7.5 million tonnes of crude oil. It has modern equipment including a sophisticated complex for deep processing of black oil. The use of new technology has allowed the refinery to begin production of environmentally friendly lead-free gasoline and low-sulphur diesel. In addition, the refinery produces kerosene and furnace oil.
Bogatyr Access Komir, operator of the Ekibastuz coal basin, is the largest Kazakh coal producer and the major supplier of national heat-power plants.
Coal production relies on opencast technology at two sites, Severny and Bogatyr. The company sells 30 to 35 million tonnes of coal annually, 60% of it to Russian power plants.
The company is making sustained progress. Programmes have developed for the period until 2016 to modernize the opencast pits and improve the consumer qualities of the coal; the Ekibastuz Coal programme includes a range of measures to retain its position on the Russian market, support domestic companies, cut down costs, improve quality and address social problems.
The Vostochny open pit (a branch of Eurasian Energy Corporation) is a unique mining enterprise practicing opencast techniques, including overburden and production operations, coal processing at a surface complex, loading coal into railway wagons and routing. Annual output is up to 20 million tonnes.
The Ekibastuz Municipal District Power Plants 1 (AES Ekibastuz) and 2 (Plant EGRES-2) are the most powerful and high-tech power facilities in Kazakhstan, contributing a significant proportion of the power for the domestic market. The plants were designed to use local coal and are located close to the deposits, which largely explains the low cost of their electricity.
The Aksu ferroalloy plant is a branch of Kazchrome; it performs large-scale production of chrome, siliceous and manganese alloys. The plant’s favourable geographical position ensures the necessary supplies of raw materials, power and manpower. Nearly all the output is exported; the competitiveness of its products relies on continuous reconstruction and modernisation by the company.
The Aksu District Power Plant (a branch of Eurasian Energy Corporation) consists of seven power generating units. It was the first Kazakh power plant and forms an important node connecting the power systems of West Siberia, Altai Territory and North-East Kazakhstan. The installed capacity of the plant is 2,100 MW. It has been in operation for more than 25 years.
Transport and Communications
The development of the Region’s industrial potential has necessitated the upgrading of its transport and communications network. The region is the starting point for the largest domestic oil pipeline to Shymkent, power transmission lines to various locations, the Irtysh-Karaganda-Zhezkazgan canal, and railways to in Kazakhstan and Russia. Roads provide important links in the local transport infrastructure; in 2002 the Region’s road network had a total length of 3,433 km.
In recent years radical changes have taken place in the agriculture sector. This is now composed of private farms, partnerships and co-operatives. The traditional local occupations are crop and livestock production. Processing of farm produce has been launched in the Region.
The main crops are durum wheat varieties, which possess excellent baking qualities and are in high demand. In 2002 the Region achieved the highest yield since the “virgin land” times. There is no doubt that the Region will not only be able to supply its own needs but also export farm produce.
An agricultural development programme is being implemented in the region. Loans granted to farms will allow them to increase the areas under crops. Other programmes aimed at developing livestock production have worked to materially increase the numbers of cattle, sheep, goats and pigs as well as meet, milk and fat outputs.
Financial investment in the agricultural sector was 1,074.48m tenge as of 1st August 2003. This was made up of 669.09m tenge from the national budget, 192.2m tenge from the regional budget, 33.2m tenge from local budgets and 180m tenge in loans from commercial banks within co-financing programmes. Loans worth 696.38m tenge were drawn on, including 516.38m tenge spent on funding budgets at all levels and 180m tenge used for funding second-tier banks.
Since the beginning of 2003, as part of the target programmes, 3,588 jobs have been created in the agricultural sector: 1,745 of them permanent, 1,843 temporary or seasonal.
The banking system consists of 2 regional banks and 17 commercial bank branches. Personal savings made up 4.142 billion tenge in the national currency and 5.897 billion tenge in foreign currency as of 1st August 2003 and bank loans to small businesses 14.9 billion tenge. The local insurance market offers a full range of services, including life insurance, accident insurance, medical insurance, cargo insurance, civil and professional liability insurance and re-insurance. There are favourable conditions for the effective development of the securities and leasing markets.
Small and Medium-sized Businesses
Solving the unemployment problem, providing the market with domestic goods and services, generating competition and forming a middle class, which is a stabilizing stratum of the society, small and medium-sized businesses have played a key part in boosting the region’s economy.
The indices of small business development in the region show that the trends are clearly favourable. Over 17,900 small business employing more than 52,900 persons operate in the region. In the first half of 2003 small businesses produced 15.6bn tenge worth of goods and services. More than 2.4bn tenge was collected in taxes and fees.
The regional administration or Maslikhat has developed and passed a Programme for Developing and Supporting Small and Medium-sized Businesses in the Region in 2003-2005. Under this programme, the objective for the coming years is to invigorate the economic activities of small and medium businesses and increase their share of the gross regional product. Special attention has been paid to financial support for entrepreneurs. The regional budget has allocated 75m tenge for this purpose, 70m of which is targeted for lending to priority investment projects of small businesses. At a session of the lending committee for the development of import substitution companies, 18 projects worth a total of 100.8m tenge were considered and approved for further loans.
In order to organize import substitution enterprises and inform businessmen of the situation in the market, a catalogue focussing on goods imported by major companies in the Pavlodar region has been published; this includes over 10,000 items.
Contacts have been established between public associations of Pavlodar businessmen and their counterparts in adjoining regions of Russia. Altogether there are 17 businessmen’s associations or business support organizations functioning in the region.
The most urgent tasks for the Pavlodar region are to attract public and private investment and foreign capital into its processing industry, which needs modernization of fixed assets; this is essential to prevent the region from becoming purely a raw materials supplier. The structure of capital sources is dominated by private investment, mostly from enterprises with foreign involvement. Public investments accounted for 13% of the total, which is 2,407.3 million tenge.
Investments in fixed capital totalled 22.655 billion tenge in 2002. The main source of investment is companies’ own funds. In the capital investment structure, a major proportion is allocated to equipment and machinery or building and assembly work. The main recipients of investments are the processing and mining industries (37.9% and 19.7% respectively) and transport and communications (10.1%). An increase has been seen in capital investments at large industrial complexes (for example, 3.2 billion tenge for the Aksu ferroalloy company, 3.2 billion tenge for Eurasian Energy Corporation and 1.6 billion tenge for Pavlodar Petrochemical Company). Investments from the national budget more than doubled compared with 2001; this was allocated to health, education, road building, supply of quality drinking water to rural areas (the Drinking Water Programme) and building a diagnostic centre and a sports complex.
Labor, employment, social protection
In 2002 per capita income in Pavlodar Region averaged 102,912 tenge, a 9.8% increase compared with the previous year; this is 2.8% higher than the national average. The average monthly salary exceeds 20,000 tenge. At the same time, real income increased by 5.6%. This suggests high buying power among the population.
Akim’s working programme for 2003 and a poverty reduction programme in 2003-2005 envisaging a comprehensive approach to this problem are being implemented. The local employment authorities are taking measures to improve the employment situation by hiring people for public work and providing them with professional training.
To date, the Region has over 500 schools. Professional training is provided by dozens of vocational schools and colleges. A number of branches of universities from Almaty, Karaganda, Omsk and Novosibirsk were opened in Pavlodar, Ekibastuz and Aksu in recent years.
Health care in the Region comprises about 300 facilities. There are 45 hospitals with a total of 5,710 beds and about 100 polyclinics and outpatient departments with a daily attendance in excess of 20,000 patients.
At the end of 2002, which was declared The Year of Health, a medical diagnostic centre was opened in Pavlodar; there are no similar facilities in Kazakhstan. The centre has modern imported equipment for immunological tests, DNA analysis, and early pre-clinical diagnostics.
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